Page 33 - EDM Today Spring 2025

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loss and policy at issue, the business structure of the
from your agent/broker or carrier directly. The key request
company, and where the business is headquartered.
is for “a certifi ed copy of the policy,” to ensure you receive
This is important because state law drastically varies
all applicable terms, provisions, and endorsements.
in some instances as to how insurance policies apply
ET: Should an insurance policy cover the amount of
and on how certain insurance policy provisions are
an award AND the cost of defense? How does this
interpreted. One common example of this variation
play out in real life?
policyholder to provide reasonable notice of a claim
CA: The answer to this straightforward question is not
against it. Some states require that the insurer be
so straightforward. Whether or not a policy covers the is how states consider notice provisions requiring a
prejudiced by any late notice, while others fi nd don’t
amount of an award (i.e., judgment or settlement
require prejudice or fi nd prejudice as a matter of right.
against you), generally referred to as indemnity, and
SIGNED, SEALED, DENIED: the cost of your defense depends on the type of policy, ET: If an insurance agent offers a business owner several
the coverage(s) purchased, the type of business being
products with varying levels of coverage, how do I know
covered, and what is negotiated. Many types of business
what is right for me?
AVOIDING THE PITFALLS OF BUSINESS INSURANCE EDM Today Magazine EDM Today Magazine EDM Today Magazine
policies are written to indemnify any award up to the
CA: The name of the game is risk management – the
applicable policy limits, and to provide a defense outside
your risk is. Unfortunately, it is not realistic (or affordable)
indemnify any award up to the applicable limits, but do
You sleep soundly at night, of the policy limits. However, many others are written to only way to properly manage your risk is know what
comforted by the peace of mind not include any defense obligation; meaning you have to have insurance that will apply for each and every
that comes with having business to pay to defend yourself. Still some others are written to potential scenario that could ever be contemplated.
insurance. You have a trusted agent, provide indemnity and defense, but only up to and within Looking at the company’s past losses is a good start
a signed policy, and confi dence that the policy limits. Moreover, many policies are written with to determine what risks it has and for the insurance it
you’re protected—until the claim deductibles or self-insured retentions that must be satis- needs. Having a trusted insurance agent or broker that
is denied. Are you doing your due fi ed by the policyholder before the insurance kicks in. has experience with the type of business you have and
diligence, or just assuming your ET: When I review my policy, what language would I look the type of losses that are common is a very useful tool
coverage is what you need it to be? for to help me know if defense costs are covered? to aide in the insurance process. Business networks and
organizations are also good sources of information on
what coverages your business should be looking for.
Every year, businesses lose mil- EDM Today Magazine EDM Today Magazine EDM Today Magazine
CA: Generally you will look to the “Insuring Agreement”
lions of dollars because insurance or “Coverage” section of a policy to determine whether
claims are denied. This can happen it includes a defense obligation. If a separate duty to ET: Is the coverage limit based on volume of sales or
because a claim doesn’t fall under defend obligation is included, there will usually be lan- maybe the net worth of a company?
the policy or perhaps because the guage to the effect that “the insurance company has the CA: Yes, a company’s sales and worth are factors,
coverage just isn’t enough to cover right and duty to defend you.” You will also want to look but they alone are not determinative. Many small
the actual loss. at any “Supplementary Payments” provisions, which businesses have the same type of coverages as very
There are a number of reasons why these discrepancies occur. A business owner may have not purchased the generally speaks to whether or not the costs and large businesses, but at differing levels. For example,
necessary amount of insurance or missed some important exclusions in the fi ne print. The failure to fully explain expenses incurred by the insurance company will or both a local, family owned shop and a national shop likely
what the company does or the failure to appreciate the risks their company faces may also impact coverage. will not reduce the policy limits. You should also look for want business interruption coverage that kicks in when
their business must close for certain reasons; however,
any language referring to the policy limits being reduced
These details can come back to haunt you when you need to fi le a claim. EDM Today Magazine EDM Today Magazine EDM Today Magazine
the time span that such coverage applies and the
by defense costs, “eroding limits,” or “defense within
In this article, we’re taking a look at where these breakdowns usually happen—and more importantly, what small limits,” which generally indicates that any amounts spent maximum policy benefi ts will be vastly different to
businesses can do to stay ahead of them. A little clarity now can save a lot of stress (and money) down the road. in defense will reduce the policy limits available for refl ect the potential business income. Similarly, the
indemnity. Attention should be given to any language
amount of liability coverage maintained by the local,
For help with these issues, EDM Today reached out to Christine Anto, a partner at Amundsen Davis whose practice stating that the carrier has the “option” to defend, as it family owned shop would likely be a good deal less than
is focused on insurance coverage and risk management, for some practical considerations. means there is no “duty” to defend and the policyholder a national shop because a third party claimant would
must defend itself. Special attention should also be know that the national shop had “deeper pockets.” You
ET: Should my carrier provide me a copy of the policy when I purchase given to any policy language addressing a deductible want your insurance to refl ect and protect the value of
the insurance? or self-insured retention, as it could speak to who is what is being insured (company, property, etc.).
CA: You should always receive a full and complete copy of your policy after responsible for defense costs and when. A coverage attorney with knowledge of how policy terms
purchasing it. Usually, it is sent out by the carrier within a couple of weeks of the ET: For companies who have plants in multiple and provisions are applied can also assist in ensuring
purchase or inception. You should always take a look at the policy documents states, does state law impact what must be included your insurance program is successful.
provided to ensure they include what you intended. Policies generally consist of EDM Today Magazine EDM Today Magazine EDM Today Magazine
in coverage?
Declarations, Coverage Forms, and Endorsements. Special focus should be given to ET: What are reasons why coverage can be denied?
the Declarations, which will show the coverage(s) purchased and the applicable CA: What state’s law applies to the interpretation of a
policy limit(s). However, you should also take a look at the coverage terms and pro- policy is one of the fi rst questions a coverage attorney a. Type of event
visions, especially the exclusions, to be aware of what the policy covers and doesn’t faces in assessing coverage. Unless an insurance policy b. Timeliness of reporting an event to your
cover. If there is a discrepancy, it should be brought to the attention of the carrier and has an explicit “choice of law” provision, the state law insurance carrier
any insurance broker or agent. In many states, it is the burden of the policyholder to that will apply is often based on an individual state’s c. Insuffi cient or incomplete disclosure of the work
point out any mistake on the policy – policyholders are expected to know what they “choice of law” standards. Some factors considered in your business does or your volume of sales
EDM Today Magazine EDM Today Magazine EDM Today Magazine
Christine Anto are buying. If you do not receive a copy of your policy, you can always request one such analysis is where the loss took place, the type of (Continued on next page)

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